For the first time in recent years, Ficci has toed the BJP line that selloff agreements should have clauses on how exactly the acquirer of a public sector unit (PSU) can invest its kitty.

The report comes a day after disinvestment minister Arun Shourie defended the terms at which the Centre sold its stake in Videsh Sanchar Nigam (VSNL) to the Tatas. He said no specific clause giving the government veto powers on investment had been inserted because one had to be “flexible on these issues.”

By deciding to reflect the party sentiment, Ficci, long seen as a chamber with a saffron hue that rarely speaks against the official government stance in a controversy, has exposed the deep fault-lines in the ruling coalition on reforms in general, and selloff in particular.

Shourie laid down his stand on Tuesday, but there are signs that it is not palatable to all in the government. The new line of thinking is to have an institutional mechanism that would help avoid controversies like the one that has broken out over the Tatas decision to squeeze out Rs 1,200 crore from VSNL for investment in group firm Tata Teleservices. This could be done through changes in selloff rules.

The row over VSNL has given reform baiters within the government a chance to challenge the idea of disinvestment. An inter-ministerial report on restructuring PSUs has asked the government to retain firms that are strategically important, highly profitable, large revenue earners, monopolistic in their market or are discharging social responsibilities.

If threats to his position were not enough, Shourie is unlikely to find comfort in a Ficci report that says VSNL was guided by clauses in the selloff pact. “If there is a controversy, the ministry of communications controlling shares of the company may enter into a dialogue and remove irritants,” the report said.

The report, titled Disinvestment: A case for faster action on big ticket sales, argues that the consolidation after the sale of big PSUs “will provide critical economies of scale essential for companies to remain globally competitive.” This will warm the cockles of the Tatas and the Ambanis, who after snapping up VSNL and IPCL, want to consolidate telecom and petrochem businesses.

The report swats claims that the sale of VSNL and IPCL have transferred monopoly powers from the government’s hands to that of a private enterprise. Contending that trade and investment liberalisation has meant that old monopolies are automatically crumbling, Ficci has argued that monopoly power should now be gauged in a global context.

VSNL STRONG IN DEFENCE

FROM OUR CORRESPONDENT

Mumbai, June 5:

Videsh Sanchar Nigam Ltd (VSNL) today tried to play down its decision to divest its stakes in Intelsat Ltd and Inmarsat and informed the Bombay Stock Exchange that according to the listing agreement, it is not required to communicate on events which are yet to crystallise.

The company dubbed it “misleading” when it said that “the news items refer to VSNL’s shareholding in Intelsat Ltd and Inmarsat Ventures Plc which are the successors of erstwhile Intelsat and Inmarsat Inter Governmental Organisations respectively. Intelsat and Inmarsat have now been converted into companies.”

“Under the relevant legislation applicable to them, these two organisations are proposing to launch initial public offers (IPOs). Matters relating to the IPO are subject of confidentiality agreements which VSNL was required to enter into with these two organisations,” the company said in a late evening press communique.

“Given this uncertainty about the IPOs, and the totally nebulous status of the IPOs, we believe that spreading news of this externally would have been financially imprudent on our part and may have led to allegations of manipulation.”

“There is no certainty whatever that these IPOs will take place and even if the IPOs take place, there is no certainty of the level at which the IPOs will be priced or the number of shares that will be taken up,” VSNL said.

Arguing that there is no certainty whatsoever about any of the factors relating to the proposed IPOs by Intelsat and Inmarsat, VSNL said, “The uncertainty relates to the proposed date of the IPOs and there is no certainty that these IPOs consisting of initial and secondary offering will crystallise.”

TELCO DOES A U-TURN,CUTS LOSSES

FROM OUR CORRESPONDENT

Mumbai, June 5:

Tata Engineering and Locomotive Company (Telco) today announced its net losses had fallen to Rs 53.73 crore in 2001-02 from Rs 500.34 crore in 2000-01.

Taking a sharp U-turn towards profits after seven successive quarters of losses, the company said fourth-quarter profit before tax stood at Rs 106 crore against a pre-tax loss of Rs 146 crore in the same period previous year.

The numbers beat the expectations of analysts, who were also cheered by the announcement that Indica’s operations had finally generated a cash profit in the third year of operations on volumes of over Rs 600 crore. No dividend was declared by the board because the company is still suffering a loss.

Sensing that a turnaround was close, investors pushed up the Telco share by almost 7 percent to Rs 134.85 on the Bombay Stock Exchange.

In the fourth quarter, the auto major made a net profit of Rs 106.20 crore compared with Rs 215.41 crore loss in the corresponding period. Net sales and income went up to Rs 3,062.67 crore from Rs 2,618.57 crore, helping the company scramble up the slope, Kadle told reporters.

Revenues were up 9 per cent from Rs 8,164 crore in 2000-01 to Rs 8,918 crore in 2001-02 while cash profit rose to Rs 381 crore from Rs 54 crore.

Tata Sons executive director R. Gopalkrishnan said a dramatic turnaround after a disastrous performance in the previous financial year proved the mettle of employees.

Kadle attributed the improvement to cost reductions amounting to Rs 332 crore in financial year 2001-02, gains in market-share and prudent fiscal management. These factors combined to drive up the operating profit to Rs 740 crore, up 80 per cent over Rs 411 crore in the previous year.

Despite sluggish market conditions, Telco’s share in medium and heavy commercial segment increased to 68 per cent. In trucks, the company cornered 72 per cent of the market.

Both figures represent a four-year record achieved in a market that declined an overall 3 per cent.

Indica V2 broke the record in the “B” segment to become the largest selling model for the last nine months of 2001-02. The car now has a market-share of 23 per cent. In the passenger vehicle industry as a whole, the company emerged as the second largest player.

Analysts are of the opinion that the company was also aided by setting off an amount of Rs 1,179 crore, mostly carried forward in the balance sheet as deferred revenue expenditure against its securities premium account to reflect more appropriately its future operational performance.

NEW POWER TARIFF PLAN READY

FROM OUR CORRESPONDENT

New Delhi, June 5:

The government plans to finalise the new power tariff policy by September and has sent the draft to an independent research outfit for examination. This has been done to ensure that interests of all stakeholders are taken into consideration.

“The policy has been made after consulting all stake holders, including state governments. We have sent it for comments to an independent organisation. It will not be prudent to name the body since the text is under scrutiny,” power minister Suresh Prabhu said today.

Speaking at a seminar organised by Independent Power Producers’ Association (IPPAI), Prabhu said the new policy would help regulators in states to fix tariffs and state electricity boards to devise strategies to rationalise power distribution. “It would also remove the problem of multiple tariffs in various states.”

Rates based on availability based tariffs were announced by the Central Electricity Regulatory Commission (CERC) in recent months, but they ran into resistance from central power public sector companies like National Thermal Power corporation (NTPC).

Prabhu stressed the need for state-of-the-art technology in distribution to make power sector commercially viable.

Delivering the special address at the conference, he
said electricity boards must make the Accelerated Power Development Reforms Programme (APDRP) if they want the sector to improve.

“One of the major thrust areas of the programme is to bring in accountability at the feeder level. Detailed strategies have been worked out and areas where these will be implemented have been identified,” Prabhu said.

“A dialogue is in under way with state governments to sign memorandum of agreements, under which APDRP funds will be released on the basis of progress achieved in achieving reform milestones. Memorandum of agreements are much more stringent than the Memorandum of Understanding (MoU) entered into earlier.”

Prabhu said with states concentrating on reforming the distribution sector, many have shown encouraging results
with a sharp reduction in their losses.

Haryana, Andhra Pradesh and Rajasthan are among the few to have shown positive results. In Rajasthan, for instance, the recovery rate has gone up to 98 per cent recently.

Distribution is the key to achieve commercial viability of the power sector in general, and state electricity boards (SEBs) in particular, the minister said.

Prabhu described as a welcome change the earnestness among several states to come forward to sign memorandum of agreements with the Centre to start distribution reforms.

RULES TO CURB LAUNDERING

FROM OUR CORRESPONDENT

Mumbai, June 5:

A Reserve Bank of India constituted group has laid stress on the ‘know your customer’ (KYC) rule among banks apart from strengthening the existing framework against money laundering activities in India, including setting up of a nodal agency such as a Serious Frauds Office.

The group, chaired by RBI deputy governor Y V Reddy, said the existing framework against
money laundering activities should be strengthened by improving the procedures and policies for preparing appropriate customer profiles and co-ordination and co-operation with regulatory and other authorities (other than those that have search and seizure powers vested by law) and sharing of information and reporting of suspicious
activities.

Pointing out to an IMF assessment of the financial sector in India that its existing guidelines against money laundering and fraud were generally adequate, the group said that further initiatives by the government, RBI, and other regulators in terms of legal changes, policy decisions, and adoption of procedures will be useful.

It said that the respective roles of the financial supervisory authorities and the enforcement and criminal/terrorist detection agencies have to be delineated and regulatory gaps and overlaps removed. However, at the same time, policy for individual banks will have to take into account the size and nature of operations of the bank and extent of computerisation, keeping in view the nature of the Indian context in which the banks operate.

According to the group, the specific areas where further action is needed include creation of greater awareness of the threat of money laundering and terrorist financing through specific guidelines and other awareness programmes, adoption by banks of policy, procedures, and controls required to prevent potential misuse of the banking system by money launderers.

This, the group averred, will comprise renewed emphasis on the need for concerned bank staff to familiarise themselves with the KYC policies and procedures in day-to-day business and with applicable laws.

The group has called for a re-look at the existing deposit schemes available for non-residents where particular emphasis should be laid on establishing the source of funds. It also called for creation of a data bank for suspicious transactions and circulation of indicative list of suspicious activities to assist banks in detecting suspicious patterns of behaviour by their customers.

BHARTI WAVES MAGIC WAND FOR AIRTEL

FROM OUR CORRESPONDENT

New Delhi, June 5:

Bharti today unveiled a fresh logo and a battery of new brand managers to boost AirTel, its cellular services brand, apart from announcing a Rs 100-crore investment in its flagship mobile service.

Saurav Ganguly will be the brand ambassador for AirTel Magic in Calcutta, while Madhavan, the new heartthrob of south, will charm customers in Tamil Nadu.

Shah Rukh Khan and Kareena Kapoor, who steps into her elder sister Karisma Kapoor’s shoes to epitomise youth and vivacity, will be Magic’s face and voice.

“We will announce a series of new value-added services and special packages for cellular subscribers in Calcutta and will soon emerge as the market leader in the city,” said Sunil Bharti Mittal, chairman and managing director of Bharti Group. However, he declined to specify just what his company had in mind for customers.

The commercial launch of cellular services in Haryana, UP West (Uttaranchal) and Cochin is expected next week. The firm will enter Gujarat, Maharashtra, Mumbai, Goa and Tamil Nadu by June 15. “With 21 per cent of the market, we are leaders in terms of the area covered. We will try to maintain it even if the BPL-Batata merger is legally formalised,” Mittal said.

Bharti is repositioning “Magic” as AirTel Magic. The move is aimed at leveraging AirTel’s brand strengths.

Anil Nayyar, president of Mobility Leaders at Airtel said: “The new strategy will enable customers to get their account status and other details from anywhere.

For instance, an Airtel customer in Delhi will get details of his payment and other services simply by dialling 121 even while he is in Calcutta. This has been made possible by implementing the electronic customer relations management (e-CRM) technology.”

ILD service

The government’s security agencies are likely to review the issue of security clearance certificates for Bharti and other international long distance operators by the month-end.

REJIG PLAN OF HMT HANGS FIRE

FROM OUR CORRESPONDENT

Mumbai, June 5:

HMT Ltd, the public sector engineering company, is in the throes of a major crisis as its organisational restructuring plan is now hanging fire for nearly two years.

R.A. Sharma, the acting chairman of the company, has resigned. But the government is yet to release him as the ministry of heavy industry has not picked his successor yet.

According to sources, the ministry is dithering on the issue because the two names that have been shortlisted are under the investigation of the Central Vigilance Commission because of the alleged misdemeanours of the two candidates.

While in the case of the first candidate, the company has recommended exemplary punishment, preliminary investigation against the second candidate is still on as allegations of the individual resigning from HMT and joining a Saudi Arabian company abound.

HMT’s performance has steadily declined over the years with the turnover of the company declining by over 40 percent during the last five years. The turnover of the company has come down from Rs 956 crore in 1996-97 to Rs 600 crore in 2001-02 despite a turnaround package and financial assistance of Rs 800 crore given by the government in July 2000.

The turnaround plan approved by the Union Cabinet in July 2000 comprised organisation restructuring, financial restructuring and man-power restructuring.

While financial and man-power restructuring proceeded as per plan, organisational restructuring remained on paper.

Under the turnaround plan three new subsidiary companies were formed under the guidance of the holding company (HMT Ltd). Three managing directors and 12 directors should have been selected and posted to head individual subsidiary company.

However, not a single post has been filled up till date, say sources at HMT.

The blame is squarely laid on the ministry of heavy industries and the holding company (HMT Ltd). Sources say that neither the ministry nor the holding company is serious and they are dilly-dallying on the postings, sources said.

The ministry is yet to fix the responsibility and accountability of each of the subsidiary. HMT sources say that the delay in appointing heads for the three subsidiaries and the holding company will hit the PSU hard in the days to come.

POLYESTER GETS BACK ITS SHEEN

FROM VIVEK NAIR

Mumbai, June 5:

It is not the steel sector alone which has been experiencing a state of buoyancy since the beginning of this fiscal. The domestic polyester yarn and fibre industry, long hit by over-capacity, is now set to witness a rise in price levels on one hand and enhanced deliveries on the other.

The surge in prices is largely been attributed to overseas factors where fibre intermediates have turned dearer following firm crude oil prices. Further, international POY prices have leapt in recent times over concerns about product shortages following plant shutdowns in certain Far East nations. However, it is the trend in deliveries since the beginning of this year that has instilled confidence among a few that the existing conditions are sustainable for the next two quarters.

According to industry circles, in the case of partially oriented yarn (POY), deliveries from the industry which had slipped to over 58,000 tonnes in February has since then shown a northward bound trend, rising to 64,300 tonnes in April and 66,120 tonnes for May.

The trend was more encouraging for polyester staple fibre (PSF) deliveries of which climbed to over 50,000 tonnes in May from 46,280 tonnes in the month of April.

This trend comes in the back of successive price hikes both for POY and PSF over the past couple of months. Reliance Industries Ltd (RIL), the country’s largest manufacturer of these commodities, earlier
this month, hiked the price of POY over 6
per cent to Rs 67.84 per kg from Rs 63.82 per kg in May and that of PSF to Rs 57 per kg from Rs 52.25 per kg. With this, the combined price increase in POY and PSF for the months of April and May stand at over Rs 10 per kg.

Sources from the industry point out that the positive course in deliveries is largely due to better demand from the fabric sector.

“A redeeming feature here is that user industries have absorbed the price increase and this can be seen in the form of rising sales. This shows that the market is picking up,” he pointed out.

This explanation is, however, contested by fabric lobby who state that the current round of price hikes is unsustainable as the consuming industry is yet to show any significant signs of improvement.

“The polyester industry has been able to raise prices in view of a similar trend prevailing internationally coupled to anti-dumping duties being imposed on the yarn,” he said.

Analysts here contend that the current scenario in petrochemicals and polyester is set to have a positive impact in the topline of RIL for the first quarter of the current fiscal year. The only concern here relates to margins of its refining business (Reliance Petroleum Ltd) which is to be merged with RIL.

ALLAHABAD BANK NET PROFIT JUMPS 101%

BY A STAFF REPORTER

Calcutta, June 5:

The city-based Allahabad bank has registered a net profit of Rs 80.21 crore for the year ended March 31, 2002—a whopping 101 per cent increase over its net profit of Rs 39.91 crore in the previous year.

The operating profit of the bank stood at Rs 407.98 crore during 2001-02 as against Rs 266 crore in the previous year, a growth of 53.4 per cent.

The business of the bank increased by 13.34 per cent to Rs 34,481 crore from Rs 30,442 crore in 2000-01. While total deposits increased to Rs 22,666 crore from Rs 20,106 crore, gross advances rose to Rs 11,815 crore from Rs 10,316 crore. Cost of deposits during the last financial year reduced to 7.2 per cent and the bank has plans to bring it down below 7 per cent in this fiscal.

Allahabad Bank chairman B. Samal said, “We plan to increase the total business to Rs 41,500 crore in the current financial year.”

For increasing the credit offtake, the bank has planned to open 30 mid business boutiques in urban and metropolitan areas to boost credit flow to the medium size corporate units. The banks can lend Rs 50-250 crore to the mid corporate sector.

The bank’s lending to the retail sector has increased to Rs 841.65 crore as against Rs 331.16 crore in the previous year.

Samal said in the current year the bank has targeted Rs 1,500 crore lending to the retail sector. The bank, which currently has 206 retail boutiques plans to add another 100 within a month’s time.

Allahabad Bank, which had plans to float an IPO in the current year, has shelved it for the time being. “We wanted to float the public issue with a premium. Since our non-performing assets as not come down below six per cent we feel that we will not be able to command a premium. Moreover, we have a comfortable capital adequacy ratio of 10.62 per cent. So we do not need to go to the capital market now,” Samal said.

Even though the bank was able to recover Rs 350 crore of NPAs it accrued fresh NPAs of Rs 530 crore. Following this, the gross NPAs of the bank has risen to Rs 2001 crore. The bank has aimed to reduce the gross NPAs by Rs 500 crore in the current fiscal. The bank is also contemplating to bring down the prime lending rate by 500 basis points in two phases. The current PLR is 12 per cent.

The business per employee of the bank has improved to Rs 1.54 crore from Rs 1.26 crore in the previous year.